Monthly VC investment deals were transformed into data on the numbers killed and wounded. The number of startups being founded were replaced by the number of demolished homes and institutions and business deals were instead replaced by sirens of deadly missiles and cries of despair. This is what we have been witnessing in Palestine over the past seven weeks, as Palestinians in Gaza have been fighting for their lives and those in the West Bank and Israel have come across growing violence.
The startup community in Gaza has been destroyed, with some of its greatest minds killed in the war. One of its most prominent institutions, Gaza Sky Geeks had its offices demolished with several key members among the thousands killed. Communication with Gaza has become incredibly difficult, with many companies losing contact with their employees in the city.
In the West Bank and among the 1948er community (the Palestinians who stayed behind in Israel), are now facing greater difficulties in keeping their startups and investment activities alive.
“There is currently nothing in Gaza,” says Dr Mahmoud Kaiyal, an investor and founder of healthtech Wikaya and CEO of Northmed Innovation Centre. “The last thing anyone can think of there is entrepreneurship. As for us in [the rest of Palestine], as entrepreneurs we have faced several crises in the past 15 years, but we have never gone through something like this.”
The technology sector according to Kaiyal comprises international companies, is more diverse and accepting of others and more accepting of Palestinians than other sectors and industries in Israel, but there is a marked shift in sentiment as this crisis has unfolded.
“The startup community is trying to cope with the current situation. The companies in the West Bank and Jerusalem are still operational. The ones who have been impacted are those who have teams in Gaza or rely on hardware components to be imported or as part of the service they provide,” says Feras Nasr, innovation manager at the UK Palestinian Tech Hub. “This war is making it hard for them to promote their companies/products/services given what is happening in Gaza, and at the same time, there is a sense of ambiguity as to what might happen after/when the war ends. Palestinian companies and startups have been very careful to separate politics from business, especially as emotions are high on both sides.”
Prior to 7 October, Nasr’s organisation worked with 13 companies from across the West Bank, Gaza and Jerusalem, who managed to raise close to $500,000 between them.
“The challenge for technology startups at that time was how to provide the necessary resources for work,” he says. “Attempting to raise funds by Palestinian startups has always been challenging and it is even more difficult now.”
The decline in investment has been a global trend, especially in the region, but Palestinian startups are perhaps feeling the biggest impact of this slowdown now.
“Before the current, bloody events, we were working with [Israel’s] labour system and there was cooperation,” says Rabea Zioud, co-founder of Hasoub, a non-governmental organisation (NGO) empowering Palestinian tech entrepreneurs in Israel. “But in the past year and a half we have witnessed a sharp decline in investments, employment and entrepreneurship activities due to the internal political conditions.”
The rise in interest rates has affected Palestinians more so than their Israeli counterparts according to Zioud, whose work system has not fully developed and who do not have the sufficient experience to face the changing circumstances.
A report from the United Nations Development Program (UNDP) and the United Nations Economic and Social Commission for Western Asia (ESCWA), entitled “Gaza War: Expected Socio-Economic Impacts on the State of Palestine”, explains that the siege of Gaza has led to a loss of approximately 390,000 jobs since the beginning of the war. Palestine’s GDP losses in the current year could range between 4-12 per cent. The report states that the poverty rate in Palestine will rise sharply, ranging from 20 to 45 per cent, depending on the duration of the war, while the Human Development Index will record a decline, which will set Palestine back between 11 and 16 years.
“The current situation has greatly affected my work, as we have cancelled several meetings and work activities and stopped travel. There are some suppliers and employees in the West Bank and Gaza who have stopped working with Israelis,” says Kaiyal. “There is great fear over the future and many Palestinians have been fired from their jobs for posting a simple picture or victory sign on their social media accounts.”
Some Palestinian companies have been asked to denounce Hamas’ attack on 7 October and those that have not have seen their contracts cancelled by clients in Israel. On the other hand, 48er Palestinian startups are registered as Israeli companies and have been subjected to the boycott movement against Israel around the world.
“There are investors of multinational nationalities who have avoided dealing with us. When some countries, especially from South America, boycotted Israeli companies, they cancelled deals with us, which increased our suffering more and more,” adds Kaiyal.
It is an issue facing many of the Palestinians in Israel.
“Inside Israel, some are boycotting you because you are Palestinian, while abroad some are boycotting you because you are Israeli,” says Zioud.
On the first day of the current war, the Israeli authorities cancelled the work permits of thousands of Palestinian workers in Israel, leaving many of them stranded in the West Bank. These workers generate an income estimated at $3 billion annually.
“Today there is a mistrust and a gap between the Arab and Israeli society and a rift in the relationship between them,” adds Zioud. “Most startups are in a state of emergency now. We were forced to postpone our current activities and many investors are afraid to enter a burning area.”
While a short ceasefire has given some Palestinians room to breathe, the future still remains uncertain.
“Entrepreneurs inside Palestine must build effective communication and plans for the future, so that they do not rely on investment at home only. We do not want to find ourselves in circumstances in which we lose everything,” says Kaiyal. “Palestinian entrepreneurs must develop their relations with the Arab world, and have Arab partners, so that we have the ability to deal with any emergency like the current events.”
But it will be difficult for many Palestinians to think ahead. Kaiyal admits that all he is thinking about is life, consumed by the scenes of death and destruction in Gaza.
“The post-war period will be frightening,” says Zioud. “What will work be like with us here, especially since the space that was available to us has already begun to shrink? Entrepreneurs are very affected by events. The situation may quickly develop for the worse. The future is uncertain. It is clear that nothing is guaranteed, and I do not know whether we can achieve our goal of helping emerging Arab startups founded by Palestinian entrepreneurs to reach the global market and connect with major international companies.”
But others, like Nasr, have hope in Palestinians and Palestinian startups.
“While the war is greater than anything seen before in modern history, the Palestinians are used to being agile and resilient, and they will rebound and rebuild. There are already discussions and plans to rebuild and support the Palestinian tech sector, including companies in Gaza, once these attacks are over,” he says.